kevin kennedy latin american economist ryan snyder...

School of BusinessInvestment Program

Sophie Forstein Operations ManagerLuke Fox Private Equity AnalystRyan Snyder Quantitative Model DeveloperKevin Kennedy Latin American Economist October 18, 2018


Investment Thesis

Company Overview and History

Company Strategy

Corporate Governance

Competitive Landscape

SWOT Analysis

Financial Highlights

Valuation Overview

Sector Overview and Outlook

Portfolio Analytics and Allocation

Ratio Analysis Recommendation

FedEx CorporationTable of Contents


Company1. Developed domestic network paired with

international exposure through recent acquisitions

2. Variable cost structure for competitive positioning

3. Investment in technology and automation

Macro 1. Increasing e-commerce environment2. Global GDP increase driving parcel delivery

necessity

Investment ThesisFedEx Corporation


Corporate StructureFedEx Corporation

Images and information pulled from FedEx company website

Revenue Breakdown

Company Structure


Company HistoryFedEx Corporation

Information from FedEx financial timeline on company website

1977 19791971

198319851989

1996 20012002 - 2016

Foundation Public Law 95-163

COSMOS

RPS Inc.

$1 Billion

China/U.S.

FTL

USPS Expansion


Critical Recent AcquisitionsFedEx Corporation

Information from FedEx Corporate website

2016

2017 2018


Data obtained from FedEx Corporate website & annual reports as well as UPS annual reports

Company StrategyFedEx Corporation

Take advantage of variable cost structure to control OPEX and improve margins

Invest in technology to improve synergies and streamline operations

Develop and integrate global networks inherited from recent acquisitions

Salaries as % OpEx


Corporate GovernanceFedEx Corporation

Data obtained from FDX Company Executives page

Frederick W. Smith Chairman & Chief Executive

Officer● Responsible for strategic

corporate direction for all segments of FDX corp

● Founded FDX in 1971 and active proponent of regulatory reform in parcel delivery industry

Brian J. Bronczek President & Chief Operations

Officer● Oversees FDX corp’s sales and

marketing and holds co-CEO in FDX Services segment

● Joined FDX in 1976 as an hourly delivery driver

Alan B. Graf Jr. Executive VP & Chief Financial

Officer● Oversees all aspects of FDX

corp’s global financial functions● Joined FDX in 1980 and served

as a senior Financial Analyst then CFO of FDX Express before his promotion


● DHL leads international market share, FedEx is stronger in US

● FedEx has higher express revenue, UPS has larger ground revenue

● Ground revenue market share has increased for 19 consecutive years

Competitive LandscapeFedEx Corporation


● Focused on time sensitivity versus total package volume

● Leader in freight

● Most automated centers in the country

● Soon all ground workers will be employed through ISP model

● Potential future threats from last mile delivery services

Competitive LandscapeFedEx Corporation


Competitor Price PerformanceFedEx Corporation

Bloomberg


Technical AnalysisFedEx Corporation

Charts published by TradingView


Data from Bloomberg

Ratio AnalysisFedEx Corporation


Data and graphs obtained from Accenture and Technavio

Sector OutlookFedEx Corporation

● Lack of infrastructure and technology are causing lags

● Last-mile delivery is the key for companies in the CEP industry right now


● Massive global presence

● Strong history of acquisitions

● EarthSmart initiative

● Good work environment

Strengths

● Competition

● Claim policies

● Highly U.S. dependent

● Market share growth

Weaknesses

● New Aircrafts

● Blockchain

● AI in distribution centers

● Last mile delivery expansion

Opportunities

● Tariffs threaten growth

● Rising oil prices

● Seasonality

Threats

SWOT AnalysisFedEx Corporation


Data obtained from Fedex Copr. Annual Report

Financial HighlightsFedEx Corporation

Revenue Breakdown03 ● Domestic revenues double international ● Express accounts for more than half of all revenues

Margins02● Gross margin of 71.3%● Operating Margin of 7.2% and ROI of 9.6%● Thin but worth it for future growth

Short-term Debt Coverage01

● Roughly $3.2 billion in cash● Current liabilities total $9.6 billion● Debt-Coverage ratio of 8.8


Target prices derived by a 2 year estimate, 5 year projection DCF model. Detailed valuation inputs found in appendix.

AssumptionsFedEx Corporation


Valuation OverviewFedEx Corporation

Target prices derived by a 2 year estimate, 5 year projection DCF model.


Target prices derived by a 2 year estimate, 5 year projection DCF model.

Scenario AnalysisFedEx Corporation


Analyst OpinionsFedEx Corporation

wsj.com


Valuation OverviewFedEx Corporation


Portfolio Analytics and AllocationFedEx Corporation


RecommendationFedEx Corporation


RecommendationFedEx Corporation

Recommendation: purchase 50 shares at a price of ~$217 for a total of ~$10,850


Investment Thesis:In a global market plagued with uncertainty, 3M is a company that focuses on the fundamentals in order to return value to its shareholders. The company has managed to increase its dividend for the past 60 years as a result of its competitive strategy that integrates diversification and innovation. Many of their products perform as staples, which will carry them through times of economic contraction, while investment in the automated car industryprovides a significant growth opportunity.

3MSell 55 shares of MMM at $202.93

Date 10/18/2018

Current Price $202.93 (-13.64%)

Purchase Price $234.97

Market Cap $119.042B ($137B)

Beta 1.18 (0.97)

Sector/Industry Industrials

Target Price $260.40

P/E TTM 28.08 (29.03)


Thank you for your time. We would like to invite questions.


Appendix


Competitive AnalysisFedEx Corporation


Financial HighlightsFedEx Corporation

2018- Potential indicator of a slowing economy

2016 - All stocks tumble after 1 year of climbing prices

2015- Fedex missed earnings twice; blamed it on macroeconomic trend; however UPS was still able to exceed expectations

2011- “Black Monday” stock market falls

2008- significant decline caused by the market crash

For the most part, these transportation stocks are affected by macro trends in the economy


1

Balance Sheet

FedEx Corporation


1

Income Statement

FedEx Corporation


1

Statement of Cash Flows

FedEx Corporation


1

Data pulled from CSI Markets

3M Company Revenue Growth

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